–With Deadline About Three Weeks Away, Deficit Panel Faces Decisions
–Co-Chair of Deficit Panel Hints That Progress Is Occuring In Panel
–Ex White House Chief of Staff Bowles Stirs Interest With Compromise

By John Shaw

WASHINGTON (MNI) – Now that Congress’s Joint Select Committee on
Deficit Reduction has held what is expected to be its last public
session, the twelve-member panel has much to ponder as its deadline
rapidly approaches.

Congress’s Joint Select Committee on Deficit Reduction is charged
to submit a report to Congress by Nov. 23, 2011, three weeks from
tomorrow, that reduces the deficit by between $1.2 trillion and $1.5
trillion for the 2012 and 2021 period.

The final package, if one is agreed to by the majority of the
panel’s 12 members, must be voted on without amendment by the House and
Senate by Dec. 23, 2011.

If the panel fails to agree on a spending cut package or Congress
rejects its plan, a budget enforcement trigger would secure $1.2
trillion in budget savings through across-the-board cuts.

The cuts would be equally divided between defense and non-defense
programs but would exempt Social Security, Medicaid and low-income
programs.

The congressional deficit panel is likely to meet nearly every
weekday over the next several weeks to try to assemble a deficit
reduction agreement. Lawmakers have said they need an agreement several
weeks in advance of the Nov. 23 deadline so any package could be scored
by the Congressional Budget Office.

In recent weeks, there have been numerous reports that the panel is
stalemated and may not reach an agreement by its Nov. 23 deadline.

Last week, Senate Finance Committee Chairman Max Baucus, a
Democrat, floated a plan that calls for about $3 trillion in deficit
reduction over a decade with a nearly equal blend of spending cuts and
tax increases.

Baucus’s plan calls for about $1.3 trillion in new revenues, $575
billion in health care entitlement savings, $400 billion in
discretionary savings and about $250 billion in other entitlement
savings.

Republicans on the panel brushed aside Baucus’s proposal as little
more than a restatement of past Democratic proposals.

Republicans on the panel then prepared a counteroffer with about
$1.5 trillion in spending cuts and about $600 billion in new revenues.
The new revenues come largely through the increase in some fees and an
assumption that tax reform would generate about $200 billion in new
revenues.

During Wednesday’s hearing, the deficit reduction panel heard pleas
from respected budget veterans that the U.S. faces a certain fiscal
crisis unless a large and carefully crafted deficit reduction plan is
developed and approved soon.

Former White House chief of staff Erskine Bowles and former senator
Alan Simpson warned the panel that “time is not on our side,” adding we
“truly can no longer afford to wait.”

Bowles and Simpson said the final package should have $4 trillion
in ten-year deficit reduction at a “minimum.”

In their testimony, former Senate Budget Committee Chairman Pete
Domenici and for White House budget director Alice Rivlin, agreed that
the new deficit panel must find budget savings that go “well beyond” the
$1.5 trillion goal set by the debt ceiling agreement last summer.

“We believe you should craft a grand bargain involving structural
entitlement and tax reform that would save at least $4 trillion over ten
years,” they said in a statement.

Domenici and Rivlin said the panel should also include a stimulus
plan in their final package, suggesting a year-long payroll tax holiday
for both employers and employees would be very helpful.

The co-chairmen of the congressional deficit panel, Sen. Patty
Murray and Rep. Jeb Hensarling, said they are fully aware that their
panel faces a daunting challenge to come up with a plan soon.

Murray said the panel is now entering a “critical, final phase” and
must craft an agreement in the coming weeks. Murray said the final deal
must be “balanced” and include spending cuts and revenue increases. She
said both parties must now “come out of their partisan and ideological
corners” and enter tough negotiations.

Hensarling said the final package should focus on “fundamental and
structural reform of our entitlement programs.”

But Hensarling also hinted that the panel may not be as deadlocked
as everyone assumes. “Don’t necessarily believe everything you read and
hear about the proceedings of this committee,” Hensarling said as the
hearing was drawing to a close.

Just prior to Hensarling’s remarks, Bowles sketched a possible
agreement the panel could embrace that caught the attention of both
lawmakers and the press.

Bowles said that based on comments he has reviewed from both
parties, he could envision a deficit reduction plan that calls for $300
billion in additional discretionary savings, $600 billion in health care
savings, $300 billion in other entitlement savings, $200 billion by
adopting the chained CPI, $800 billion in additional revenues and $400
billion in debt service savings.

Bowles said that this $2.6 trillion in savings when coupled with
$1.3 trillion in savings already achieved by earlier budget actions this
year on the debt ceiling and spending bills would result in $3.9
trillion in overall savings over a decade.

Savings of this level, he said, would “create a lot of excitement
with people in the country” and would “go a long ways toward building up
confidence that we could stand up to our problems.”

Bowles’ hopeful conclusion to the hearing was a striking contrast
to his grim warnings as the session began.

“I have great respect for each of you individually, but
collectively, I’m worried you’re going to fail — fail the country,” he
said in the opening minutes of the hearing.

** Market News International Washington Bureau: (202) 371-2121 **

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